The Japanese Yen increased sharply in the first session of the week, opening a trading week that is considered a key part of the global currency market, as a series of major central banks prepare to announce interest rate decisions and a series of US economic data that can orient the Fed's policy next year.
The Yen increased by 0.5%, trading at 155.08 Yen/USD, continuing to increase after the Bank of Japan (BOJ) said that most of the country's enterprises are expected to continue to increase salaries in the 2026 fiscal year, equivalent to this year's level. This information reinforces expectations that the BOJ may soon raise interest rates, especially in the context of rising cost pressure and wage growth.
According to Bloomberg News, the BOJ is even considering selling its ETF portfolio as early as next January. On the same day, another survey showed that business confidence of major Japanese manufacturing groups in the fourth quarter increased to the highest level since 2019, further consolidating the assessment of a clear economic recovery.
currency strategist Christopher Wong (OCBC) commented: The newly released data further strengthens the possibility of the BOJ raising interest rates. However, for the yen to truly recover, the central bank needs to show stronger commitments, while the government must maintain fiscal discipline, and the USD needs to maintain a weak trend".
Foreign exchange market is bustling ahead of a series of interest rate decisions
In contrast to the Yen, the New Zealand dollar (NZD) fell more strongly than other currencies, losing 0.36% to 0.5781 USD, after the Governor of the Bank of New Zealand denied the possibility of raising interest rates in 2026.
In Europe, the market is paying attention to the upcoming decisions of the Bank of England (BoE) and the European Central Bank (ECB).
Investors are almost betting on a rate cut from the BoE, while the ECB is likely to keep its current policy unchanged. Some experts even predict that the ECB could return to the interest rate increase cycle in 2026 if inflation rebound.
The British pound fell 0.13% to $1.3364, while the euro lost 0.06% to $1.1733.
Mr. Joseph Capurso - currency strategist of Commonwealth Bank of Australia - commented: "The BoE's decision this time will be very tight. If the inflation data released in midweek shows a slower-than-expected decline, the market may have to reconsider the next interest rate cut scenario."
US to reveal a series of economic data after historic government shutdown
In the US, a series of data were postponed due to the upcoming historic government shutdown, giving investors a new picture of the health of the world's largest economy. The November jobs report is due out on Tuesday, while the November inflation index will be released on Thursday.
The USD Index, which measures the strength of the dollar against a basket of major currencies, is currently fluctuating around its lowest level in two months, at 98.37 points.
Mr. Sim Moh Siong - Singapore Bank strategist - said: "This data is somewhat outdated and affected by the government shutdown, so the Fed will have to analyze more carefully than ever to identify the real trend of the US labor market".
